J. Crew Hires Former Gap Exec as CEO

J. Crew Group’s choice of CEO suggests that the apparel marketer may be deemphasizing its catalog roots to focus even more heavily on retail.

In August, New York-based Crew named Ken Pilot CEO, replacing Mark Sarvary, who left the company in May. Pilot was most recently president of Gap International, overseeing more than 650 stores in five countries.

Although Crew began as a catalog, catalog/Internet sales now account for only 45% of its $778.0 million in annual revenue. The company’s more than 140 stores, the first of which opened in 1989, make up the rest. And while the catalog and Web division “remains our primary marketing vehicle in terms of communicating our brand image,” says a spokesperson who declines to be identified, “our first priority is to restore comp store growth to the business.”

For its fiscal first quarter ended May 4, Crew’s comparable store sales were down 13% from the previous year; catalog and Internet sales had increased 1%. Total revenue was $167.1 million for the quarter, down slightly from $167.8 million the previous first quarter. For fiscal 2001, Crew lost $11.0 million, compared with the$11.9 million in profit it posted in 2000.

“From a competitive standpoint, J. Crew could now pose a greater threat to The Gap over the long term, because with Pilot’s background it will turn more into a retailer,” says Lori Wilking, securities analyst for Detroit-based brokerage firm H&R Block Financial Advisors. “This was the first year for J. Crew that sales in retail outpaced sales for the catalog, and there comes a point that if you aggressively enter retail, you’ll decrease catalog circulation.”

When Sarvary left Crew, chief operating officer Walter Killough said the marketer was seeking a CEO with a merchandising background. In that sense, Pilot — with his more than 13 years at The Gap — fits the bill. But like Crew, The Gap has been struggling of late. Its sales for the 26 weeks ended Aug. 3 were $6.16 billion, down 6% for the comparable period of last year; net income tumbled 54%, to $93.5 million. Moreover, The Gap’s stock price has slipped from $20.30 in September 2001 to a low of $9.10 this past July.

Regardless, “Ken has all the right qualifications to take us to the next level,” the Crew spokesperson says, given his extensive merchandising and marketing background. Pilot was unavailable for comment.

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